Q Resources launched today, backed by Rui de Sousa

Q Resources has listed today on AIM, as a vehicle for making acquisitions. What caught my eye is the involvement of Rui de Sousa, Soco's Chairman, and is well known to many Stockopedia readers.

At launch it has a market cap. of £3.28m. Here are some key facts & statements from the Admission Document:

Q Resources is a new company incorporated under the laws of Jersey. The Company has been established for the purpose of identifying and acquiring, or making investments in, Resources assets, with an initial focus on Africa and/or South America.

On Admission, Q Resources will have no trading business, giving the Directors a platform to carry out a detailed examination of potential acquisition targets. The Company, in determining potential acquisitions, will consider all sectors of the Resources industry, but will primarily focus on metals and minerals assets.

The Directors intend to complete the first acquisition within 12 months of Admission, which they intend will constitute a Reverse Takeover (and therefore will require Shareholder approval) in order to provide the Company with an operating business. Following the initial acquisition, the Directors will review the strategic development of the Company.

In conjunction with the Admission, the Company has conditionally raised £2.955 million, net of expenses through a placing of 54,583,333 Placing Shares and 13,645,833 2010 Warrants with institutional and other investors, details of which are set out below.

The Directors believe that market conditions over recent years have proven difficult for certain businesses operating in the Resources sector and that an opportunity now exists for acquiring and/or investing in such businesses and/or assets so that their growth potential can be realised for the benefit of Shareholders.

The Directors believe that recent instability in the general economic markets and the Resources industry has created a number of investment and acquisition opportunities and that a number of Resources businesses may be short of capital but yet retain potentially highly valuable assets and operations. By taking advantage of such opportunities and relatively low earnings multiples, the Directors believe they can create value by sourcing further funds and experienced personnel and thereby position the Company to take advantage of demand in the Resources sector. Through these targeted acquisitions, the Directors aim to shorten the otherwise long process they believe the Company would experience in obtaining a new Resources licence and taking an asset through to production, in readiness for any economic upturn and anticipated higher commodity price levels.

The Directors believe that Africa in particular represents an excellent opportunity with momentum now returning to the mining sector. African exports have been hit hard as the global crisis has reduced consumption in major economies. However, the Directors believe that a resurgence in demand is being driven by growth in China, India and south east Asia, and to a lesser extent by fiscal stimulus programmes in western economies followed by a slower increase in more general global economic activity.

...The Company has already appointed Rui de Sousa and Gazprombank-Invest (MENA) as consultants to the Company, conditional on Admission, further details of which are set out below in “The Investment Process” and the Board will also look to appoint other suitably experienced consultants, as appropriate...

...

Rui de Sousa has entered into a consultancy agreement with the Company to, basis, potential acquisitions and provide strategic advice thereon...

Rui de Sousa is also a director and shareholder of Quantic, a private investment group operating in certain areas of the oil and gas sector and merchant banking across Africa and the Middle East. Quantic owns 70 per cent. of Gazprombank-Invest (MENA), further details of which are set out below, and of which Rui de Sousa is also a director. Quantic also provides advisory and consultancy services to Cove Energy PLC, an AIM quoted upstream oil and gas company...

...Upon Admission Quantic Mining will be granted the Quantic Mining Warrants and Quantic, will subscribe on behalf of Quantic Mining for 16,425,000 Placing Shares and 4,106,250 2010 Warrants, further details of which are set out below in paragraphs 8 and 9.

So, Quantic will own around 1/3 of Q Resources' shares upon admission.

Whilst I see little point in investing at this stage, as QRES is simply a cash shell, I am adding it to my watchlist. It will be interesting to see what the acquisiton targets turn out to be. As a shrewd investor, Mr de Sousa's investment thesis merits further study.

The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.

SOCO International plc is a United Kingdom-based oil and gas exploration and production company. The Company has oil and gas interests in Vietnam, which includes Block 9-2 and Block 16-1; Republic of Congo (Brazzaville), which includes Marine XI Block and Nanga II A; the Democratic Republic of Congo (Kinshasa), consisting of Block V and the Virunga National Park, and Angola, consisting of Cabinda Onshore North Block. The Company's operations are located in South East Asia and Africa. It holds its interests in Marine XI and the Nanga II A Blocks in Congo (Brazzaville) through its 85%-owned subsidiary, SOCO Exploration and Production Congo SA (SOCO EPC). It holds its interests in the Democratic Republic of Congo (Kinshasa) through its 85%-owned subsidiary SOCO Exploration. It also holds a 60% working interest in the Mer Profonde Sud Block, offshore Congo (Brazzaville) through its wholly owned subsidiary, SOCO Congo BEX Limited. more »

The gain in QRES share price since launch has been quite extraordinary - and is clearly the result of rampant speculation. At present the only assets QRES has AIUI, apart from its excellent human resources, is cash of just under £3m = 5.6p/share. In order to pursue its plan, QRES will clearly have to raise much more capital (or issue a substantial number of shares to effect a paper takeover).

How can anyone justify paying 20p/share+, without knowing what the company will do? I will wait until the specifics are announced before I consider an investment, as I do not believe in buying a pig in a poke. :0)

It woudl appear that many are buying purely on hope that Rui can repeat the Cove success story. Personally my gut tells me that its more likely to be a mining play this time as opposed to an O&G story. Only a hunch though.

It did say that it coudl be others though. Id rate that chance as pretty minimal.

Thats what I dont like about QRES - I really cant get excited about early-ish mining plays (accelerated due to the QRES plan to buy more advanced but fiscally challenged) projects. Mind you, some other investors seem to manage quite well out of them, eh Mark? ;-)

Not really :0) - if you look at the ones I've invested in, they've usually been situations trading below tangible assets - more like arbitrage situations. Generally, I steer clear of early stage explorers and am more into producers or near producers - and I've learnt a few valuable lessons about those over the last couple of years (Mercator, IFL). The one (notable & lucrative) exception has been Extract, where I bought a modest stake after Rio Tinto's initial investment but before the market cottoned on. I've been very lucky there as it turned out that what Extract had found was better than anyone could reasonably have expected.

Some of the Aussie investors who "bet the farm" on it are now multi-millionnaires. Good luck to them - but it's not an investment approach I'd ever follow.

Once I know what QRES is investing in, I'll decide whether I like the look of it relative to QRES's post-acquisition market cap. If it does look like a genuinely undervalued miner of a commodity I like, then I might take an interest, noting the quality of QRES's management. I do set a lot of store in a trustworthy & shrewd management (a rare combination!).

Something going on at Q Resources (LON:QRES) with the price up to 25p (£13.5m MCap) ?

Per Mark's post #2, has the company still only got cash of £3m (ignoring salaries and costs paid since float) ? What could possibly see punters paying 4x over the odds for the potential on offer here? Perhaps that's it - QRES is getting caught up in the hype around various resources stocks at the moment.

Hmmm, perhaps... Though Vallar (LON:VAA) raised approx £700m at £10 per share and the price has fallen since to the £9.60-£9.70 range. We'd think it ludicrous if Vallar was valued £2.8bn when it only had assets worth £700m, so I think the QRES rise can be attrributed to "irrational exuberance" !

The more I see things like this happening the more I'm convinced that most ''investors' are chasing dreams and the more I am convinced that the only way to make money consistently is to buy when you know something is cheap. When you understand it enough to know that some of the value may be outed fairly soon, or even know what circumstances will most likely produce a rereating, you have a decent chance of making money.

I've been trying to recapture the brutal value driven approach that made me money from buying repos 1994-2003. Too much stock market success 2004-7 took away some of my hardheadedness, but I'm feeling back in the groove for he most part now.

If you feel tempted to chase dreams it is almost certainly best keeping the money as cash. Alternatively spending it on fast women, champagne and slow horses will probably lead to a slower casburn and be more pleasurable;-)

Couldn't agree more - and that approach has certainly worked for me over the last 18 months, when companies have been available at prices representing less than marketable assets (or cash) they own.

In the case of natural resources companies there have been a number examples of companies with such assets AND with significant potential upside from other activities they conduct (or from revaluation of those assets).

Quite agree with SM that QRes looks more like a short than a long to me, at present.